Economic Breaker Panel: February Update

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What’s in Today’s Report:

  • Economic Breaker Panel: February Update
  • Empire State Manufacturing Index

Stock futures are slightly lower this morning following a mostly quiet night of news as investors continue to cautiously eye this week’s sharp rise in bond yields.

The 10-Yr Note yield notably topped 1.33% overnight, pressuring S&P futures to session lows but yields have pulled back and stock futures have stabilized in pre-market trading.

Looking into today’s session, there are multiple economic reports to watch this morning including: Retail Sales (E: 1.0%), Industrial Production (E: 0.5%), PPI (E: 0.4%), and the Housing Market Index (E: 83).

As we move into the afternoon, focus will be on the 20-Yr Treasury Bond Auction at 1:00 p.m. ET as the results could move yields and in turn impact equity markets.

Then, the FOMC Meeting Minutes will be released at 2:00 p.m. ET, and finally Robert Kaplan is scheduled to speak at 6:05 p.m. ET.

With the slew of potential catalysts on the calendar today, bond yields will be the key factor to watch as if we see another sharp rise in the 10-year it will act as an increasing headwind for stocks.

What Could Go Wrong?

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What’s in Today’s Report:

  • Another Look at What Could Go Wrong
  • Weekly Economic Cheat Sheet: February Data in Focus

U.S. equity futures are trading solidly higher with international markets this morning thanks to positive COVID-19 headlines and mostly encouraging economic data overnight.

New coronavirus cases in the U.S. fell below 100K/day for the first time in months over the weekend while Biden is expected to speak about the new stimulus package today.

Economically, the Q4 Eurozone GDP Flash and details of the German ZEW Survey both topped estimates overnight which is helping support risk-on money flows this morning.

Looking into today’s session, there is one economic report ahead of the bell: Empire State Manufacturing Index (E: 5.7), and just one Fed official scheduled to speak in the afternoon: Daly (3:00 p.m. ET).

Bottom line, as long as the Empire data, which is importantly a February report, does not disappoint and Biden maintains a very accommodative tone regarding the new stimulus package, stocks should be able to continue higher to start the week today.

Inflation Update

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What’s in Today’s Report:

  • Inflation Update (Why the Soft CPI Is Likely Understating Inflation)

Futures are modestly lower mostly on digestion of the week’s rally, but also on some incrementally negative COVID policy headlines.

Over the past 24 hours headlines of possible COVID related travel bans to Florida and negative COVID testing requirements for interstate air travel weighed on sentiment.  Both would be economically negative (and the later a total disaster for airlines).

Economically, the only notable data was UK GDP and UK Industrial Production, and the results were mixed.  But, neither number is moving markets.

Focus today will be on any incremental COVID policy headlines, and if there’s traction on the any travel bans to states or it looks like people will need negative COVID tests to fly, that will hit stocks.  Away from COVID policy, we get Consumer Sentiment (E: 80.9) and have two Fed speakers: Williams (10:00 a.m. ET) and Daly (3:00 p.m. ET) but unless there’s a major surprise, they shouldn’t move markets.

What Level of Yields Would Be A Bearish Gamechanger?

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What’s in Today’s Report:

  • What Level of Treasury Yields Would Be A Bearish Gamechanger?
  • EIA and Oil Market Update

Futures are modestly higher on continued momentum following a quiet night of news as there was no notable economic data, stimulus or vaccine updates overnight.

Coronavirus trends continue to improve as New York State will begin to allow spectators back into arenas, while Hong Kong is reopening indoor dining.  That improvement combined with vaccine distribution is helping sentiment.

Today focus will be on Jobless Claims (E: 803K) and markets will want to see continued improvement in that number (so a further decline towards 700k).  There are also some notable earnings reports to watch, although they’re unlikely to move the broader market.  So names we’ll be watching include:  PEP ($1.45), AZN ($0.53), DIS (-$0.47).

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart

Stock futures are trading at record highs this morning as mostly underwhelming economic data overnight bolsters the case for more monetary and fiscal stimulus.

Economically, inflation data out of China and Germany narrowly missed estimates while French Industrial Production was disappointing, all of which supports the case for more stimulus to support the global economic recovery.

This morning, market focus will be on the CPI report (E: 0.3%) before the bell, and then attention will shift to Fed Chair Powell’s virtual speech in the early afternoon (2:00 p.m. ET).

Aside from those two key events, there is a 10-Yr Treasury Note Auction at 1:00 p.m. ET, which again has the potential to impact the yield curve (a big enough spike in the 10-year yield would act as a headwind on stocks).

Finally, earnings season continues with a few notable companies releasing Q4 results today: KO ($0.41), GM ($1.62), UBER (-$0.53).

Bottom line, as long as CPI does not run “hot,” Powell maintains a rather dovish tone, and there are no negative developments regarding the stimulus bill, the path of least resistance will remain higher for stocks in the near term.

Sevens Report Quoted in MarketWatch on February 9, 2021

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“With supply dynamics of the global oil market as clear and steady as they have been in years, trader focus has turned to demand in recent sessions, and with the continued vaccine…” analysts at Sevens Report Research wrote in a Tuesday newsletter. Click here to read the full article.

Market Multiple Table: February Update

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What’s in Today’s Report:

  • Market Multiple Table: February Update

Stock futures are trading modestly lower this morning after a mostly quiet night of news as the recent run to fresh record highs is digested.

Economically, the NFIB Small Business Optimism Index was 95.0 in January vs. (E) 98.0. The headline “miss” is slightly weighing on risk assets in pre-market trading this morning.

Today, there is one economic report to watch: December JOLTS (E: 6.40M) and one Fed official scheduled to speak: Bullard (12:00 p.m. ET), however the market will remain primarily focused on any new developments with the latest stimulus package.

There is also a 3-Yr Treasury Note Auction at 1:00 p.m. ET and given the recent sharp steepening move across the curve, the results could move Treasuries, and in turn, impact equities (further steepening will eventually become a headwind for stocks as the 10 year yield continues to rise).

Finally, there are a few notable earnings releases after the close: TWTR ($0.29), CSCO ($0.75), LYFT (-$0.72).

Too Much of a Good Thing?

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What’s in Today’s Report:

  • Can There Be Too Much Of A Good Thing in Markets?
  • Weekly Market Preview:  Stimulus Expectations and Vaccine Optimism Remain the Two Drivers of Stocks
  • Weekly Economic Cheat Sheet:  Inflation

Futures are modestly higher following a quiet weekend of news as global markets rose on momentum from last week’s rally.

The stimulus process continued as Democrats passed procedural votes on Friday and a $1.5-$1.9 trillion stimulus bill is expected to become law sometime in the next 4-6 weeks (this expectation remains the single biggest driver of the stock rally).

Economically, the only notable report was German Industrial Production, which slightly missed estimates (but that’s not moving markets).

Today there are no economic reports and only one Fed speaker, Mester at 12:00 PM ET, so markets will continue to be driven by stimulus headlines and vaccine optimism, and as long as there aren’t any material disappointments on either front, the path of least resistance for stocks remains higher.

Yield Curve Update (Getting Closer to a Danger Zone)

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What’s in Today’s Report:

  • Yield Curve Update (Getting Closer to a Danger Zone)
  • Jobs Day

Futures are modestly higher as the Senate moved forward on stimulus, so the positive market narrative of more stimulus and more vaccine continued overnight.

The Senate voted 51-50 (VP Harris breaking the tie) to move forward with the reconciliation process on a stimulus bill, meaning a $1.5T-$1.9T bill should pass in mid-March.

On the vaccine front, the FDA scheduled a Feb. 26th hearing to approve the JNJ single dose vaccine, so by March 1st there will be three COVID vaccines in the market.

Looking forward to today, the key number is the Jobs Report and estimates are for Job Adds of 50K and Unemployment Rate of 6.7%.  Unless the number is very good (so over 400k jobs adds, UE rate sharply lower) or absolutely horrible (-100k job losses or more) it shouldn’t interrupt this week’s rally.

Tom Essaye Quoted in Courthouse News Service on February 2, 2021

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The run on silver, a notoriously volatile asset, could continue. “Looking ahead, the trend in silver is bullish…” wrote Tom Essaye of the Sevens Report in a Tuesday morning investor’s note, adding that it is not unreasonable to see silver reach $80 per ounce in a longer timeframe. Click here to read the full article.